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How the Met’s finances will be run in future

Here’s how the Met musicians, in a statement today, see the future financial control of the house, with the manager Peter Gelb dependent on the approval of an external scrutineer.

Throughout these contentious negotiations, a clear question emerged: What has been driving increased costs? We have maintained that a sustainable future for the Met must be based on cost-saving measures beyond simply cutting employee compensation. Our data-driven approach was substantiated by numbers directly from the Met, and the independent financial analyst, Eugene Keilin, ultimately agreed with our assertion that the Met could best realize major savings through more efficient spending. Moreover, as part of the settlement, the Met’s finances will be subject to unprecedented oversight, with powerful new mechanisms put in place for enforcement and accountability. The contract calls for an “Efficiency Task Force” between artists, management, and the board, which will have direct input on spending practices. Mr. Keilin will continue as a contractually-mandated partner working directly with this task force to trim unnecessary costs, ensuring that the Met can be run more effectively.

We hope our unique system for financial oversight will be a model for other organizations, and will give all stakeholders the means to ensure that the past practices that led us to this brink will not be repeated, here or anywhere else. Critically, the deal accomplishes all of this while preserving the artistic core of the house. The orchestra’s base compensation rate remains untouched and will see an increase in the 4th year. Instead, cuts in compensation will primarily be felt through the reduction of a fixed payment. Met administration will see matching cuts, beyond which management is contractually obligated to cut another $11.25M annually. This arrangement reflects the “Equality of Sacrifice” provision of our pending contract; we are all tightening our belts because it is in everyone’s best interest to see the Met prosper in the coming years.

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Comments (39)

The concerns about inefficiency at the Met are well-founded. The Vienna State Opera and the Paris opera’s two houses all run on budget’s that are far less than half the Met’s. The quality of the houses is similar. The Vienna State Opera has the Vienna Philharmonic in the pit. And the cost of living in Paris is similar to New York’s.

The lack of national health insurance (like Europeans have) and the high cost of living in NYC do not come near accounting for these large differences.

The new position is essentially a comptroller. This is a very common business practice. Most corporations and larger government institutions, like state universities, usually have a comptroller. I agree with the musicians that larger arts institutions need such a position. This is especially true when the manager of the opera house deals with both financial and artistic decisions. I also feel the musicians in orchestras and opera houses should have a greater role in some of the artistic decisions. Both sides worked together to create a good outcome from a difficult situation. My compliments to both.

Strikes are a common part of French culture, so it’s a mistake to read too much in the the Paris Opera’s labor relations. The Met’s bloat is a poor way to bring about labor peace. The house consumes so much funding it creates a financial vacuum in the city’s cultural sphere. The NYCO is just one of the victims.

Oh, so now the NYCO is Peter Gelb’s fault too? I was just getting used to blaming the company’s demise on Gerard Mortier’s Eurotrash productions With so much finger-pointing going on, it’s so difficult to stay on top of the blame game.

It’s the fault of America’s private funding system. It concentrates lavish institutions in a few financial centers where the wealthy live while the rest of the country is neglected. And even financial centers are not spared the problems of this system. As NYC shows, the rich service themselves while “The People’s Opera” is shut down.

The USA only has 3 cities in the top 100 for opera performances, while German with one fourth the population has 47. The difference is created by public funding — something all America’s classical music Republicans don’t like to admit.

“Equality of sacrifice” in this context means that the cost centers that make up 2/3 of the Met’s budget will be the source of 1/3 of the cost savings, whereas the cost centers that make up 1/3 of the Met’s budget will be responsible for making up the other 2/3.

Of course, if they had been able to do math, they wouldn’t have gone into music in the first place.

This is assuming that the two cost centers have no relationship to one another, which is inaccurate. For example, look at the fact that overtime and rehearsal spending fall under management’s purview, and so if they reduced scheduling of both (as suggested by the musicians), it would effectively reduce both labor costs and management’s expenses on performances. This doesn’t even mention the expenses management could reduce by better utilizing co-productions and more efficiently-managed new productions, as they have agreed to do.

It seems unlikely that the Met will ever bring its budget in-line with international norms. It would require cutting its budget in half. NYC needs at least 3 or 4 houses at minimum to serve its metro population of 18 million, but the Met consumes so much money it will be next to impossible to fund any other houses. The Met’s bloat is thus quite destructive.

The Met also needs a smaller secondary venue, but under is current spending plan, that too will be impossible.

If the Met cut its budget in half, it could pay the orchestra, the the chorus and the stagehands, and have no money left over for anything else. I mean, literally nothing else: no solo singers, no conductors, no directors, no designers, no administrators, no productions, no heating or air-conditioning, no insurance so the building could be opened for audiences. So the Met could be run on half its current budget fairly easily, so long as the Met didn’t actually present any opera. (Of course, the lack of opera presentations would probably mean the box office would take a hit, and the major donors might be a little diffident about giving their millions to an opera house that was dark 12 months a year, but I’m sure those problems could easily be solved by firing Peter Gelb’s chauffeur.)

The payroll at the Met is $200 million per year. That’s about $65 million more than the *entire* budget of the Vienna State Opera which has similar quality. We see that public funding systems for the arts are more efficient that America’s private system.

For one example, about 1/3rd to one half of the administrative staff in America’s larger arts institutions do nothing but raise funds. European institutions do not even need these “Development Departments.”

Careful William! When you argue with Lewes and he doesn’t get his way, he first states you are untruthful and then brands you as a “LIAR”, stating unequivocally that in your posts you lie “ALL THE TIME!” That’s what he did with me, and apology is clearly not a word in his dictionary.

My posts go back more than 7 months to the time when I worked with Claudio Abbado, vastly longer than I can see posts from Lewes (but I’m prepared to be proved wrong). He’s almost certainly a Gelb troll who found his way here in a vain attempt to bolster Gelb’s standing in view of the mauling he was receiving.

This is pretty much a norm for continental Europe. They remain deeply skeptical of private sponsorship due to the obvious social and cultural problems it creates.

Italy and Holland are two countries that have made *small* movements toward private funding due to strong pushes by right wing governments influenced by American neo-liberalism. Even in these two countries, private funding remains very limited, as do the system of laws necessary to support private funding systems. (Note that the NY Times article discusses only Turin and not Italy’s 13 other major houses. Why? The overall pattern would show that private funding is barely used in Italy so stats from the other houses would not support the article’s propagandistic thesis.)

The tables on this site shows that public funding for the arts in Europe has remained high and stable. Small drops in some countries are due to the US created economic crisis, and not a change in funding philosophy. No sign of the mythical collapse proclaimed by the American corporate media:

All European countries remain social democracies where the government spends about 50% of the GDP. Taxes are thus high, and the distribution of wealth far more equal than in the States. This does not allow privileging the wealthy with low taxes and control of arts funding.

I do suggest you have to look at the United Kingdom as a separate case as the funding models are more multi-tiered. Public funding from government sources remains relatively high, but it it is being slowly cut. Fortunately, the business sector and private donors are taking up much of the slack. The latest figures I can find are for 2009. In that year the Royal Opera House’s income was broken down as follows –

$61.92 million in ticket sales
$41.80 million in government grants
$26.30 million in sponsorships and donations from foundations, trusts and individuals
$9.20 million in commercial activities.

Whilst the ROH has its own fund raising department and an active list of donors, an organisation named Arts & Business raises funds specifically from the business community. In 2010/111, approx. $810 million was raised for arts companies based in London. Most of that total went to just 25 arts companies, including the so-called flagship companies like the Royal Opera and the Royal National Theatre. In addition, 20% of the profits from the National Lottery are channeled to arts organisations.

Exactly. That’s why I qualify my statements as “continental Europe.” The Commonwealth countries form a hybrid category that combines the American and European systems.

And correspondingly, as a general pattern, their levels of funding for the arts fall more-or-less between the two systems. London, as an exception, is equal to or better than most European cities, but most Commonwealth cities (e.g. Toronto, Sydney, Manchester, Vancouver) would be below continental European averages but above American numbers.

In less than quality sound brought to you by the amateurs at Long Tail Audio Studios. An amateur operation Gelb got a donor to fund. When I say amateur, they had no experience handling historic broadcasts when they started and the lackluster engineering shows. Also by the way, a violation of State law for not for profits. This business should be offered out to the real quality hitorical sound engineers like Ward Marston and Seth Winner. Both gentlemen have many years of experience dealing with historical tape. Long Tail Studios does not.

Despite Mr Osborne’s usual comments, my observation was not a part of the U.S. is evil in all things and Europe is perfect and better in all things non-debate. Even when one agrees with him — as I have for years about hiring practices of the Vienna Philharmonic, e.g. — he attacks any observations from this side of the Atlantic and especially ones made by those of us who write or broadcast for the puppet media here. Country by country figures and analysis are indeed useful things. So are examinations of festivals and more independent companies and presenters in countries where the state-operated entities are tired or, as with the ongoing merger plans for southwest German orchestras, arbitrarily managed. The breakdowns *within* each country vary widely and the 4.4 percent figure takes one only so far. My point was and is not to defend or attack the U.S., European, UK or other systems per se. But the idea that one and only way of both funding and running the performing arts is superior financially, socio-politically, and artistically is just absurd as is the assumption that anyone who says anything good about the American way of doing anything is some sort of right-wing Wall Street apologist.

Sorry Andrew, but the numbers speak for themselves and do not require quite so much verbal legerdemain. Germany, for just one example, has 133 full time orchestras while the USA has only 17 for four times the population. Germany has 83 full time opera houses while the USA doesn’t have any (the longest season is seven months at the Met.) We have maybe 6 or 7 genuinely functioning houses. There is hardly a European country where the US compares positively. Maybe with impoverished Portugal.

The US has opposed Europe’s public subsidies for the arts for years and the European response has been an unequivocal rejection.

The Commonwealth countries use the sort of hybrid system you speak of, and the numbers there too show that public funding systems work better. In short, and I will not be discussing this for the next couple days because I will be traveling, your views stem from an anti-European bias rather than a clear look at hard statistical data whose implications are clear.

So odd that the highly objective and truthful mainstream American press never writes about these hard, comparative facts…

Sort of ironic that Andrew’s hometown, big, rich, broad shouldered Chicago, ranks 97th in the world for opera performances per year — outranked by many European cities with a small fraction of the population and wealth. Unfortunately for the neo-con crowd, no amount of fast talking covers up these facts — hence the big silence in the American media.

Again with these lists and again with the false accusations about my politics! It is a shame indeed how awful and uninvolved in the community the Lyric Opera of Chicago, Chicago Opera Theater, Haymarket Opera Company, Opera Cabal, the Ryan Opera Center, and the annual concert performances by the Chicago Symphony Orchestra with Riccardo Muti and, this coming May, Esa-Pekka Salonen, and at Ravinia in the summer are. This coming year, in addition to the full (er, part-time) season, the Lyric will have a new commissioned mariachi opera performed numerous times both in Mexican-American communities and at the Civic Opera House, a new commissioned klezmer opera performed in two heavily Jewish communities, and a new commissioned family opera performed at the Lincoln Park Zoo. All of this is a big mind control trick, of course. We are terribly deprived here indeed compared to, say Karlsruhe or Wuppertal. And of course all of our arts in Chicago are directed by Donald Rumsfeld. From a bunker!

If Bill had even the slightest curiosity, he would find tremendous community-based involvement by and with classical music with donors and volunteers across all amounts and economic levels, one of the secrets to the success — or as much success as we slaves of Goldman Sachs are allowed — of classical music and opera in Chicago. Remember, children, the quality and importance of ANY art for is determined by the NUMBER of performances per year. Back to work!

Referring to a mutually sought, mutually agreed financial expert as a “scrutineer” belies a certain obtuse animas against the need to clarify the source of the Met’s financial troubles. What part of neutral, professional assistance is objectionable? Is Peter Gelb supposed to be above and more reliable as a financial analyst than a top- level financial guy? I don’t know what could be a better guarantee of a success than best available information, clarity about objectives and obstacles, and a pact that gets all the parties working together toward common goals. What’s the problem?

This is assuming that the two cost centers have no relationship to one another, which is inaccurate. For example, look at the fact that overtime and rehearsal spending fall under management’s purview, and so if they reduced scheduling of both (as suggested by the musicians), it would effectively reduce both labor costs and management’s expenses on performances. This doesn’t even mention the expenses management could reduce by better utilizing co-productions and more efficiently-managed new productions, as they have agreed to do.

Something must also be done about the U.S. ranking in *full time* professional cricket teams as well. (It is also only Bill Osborne who knows the truth about the party affiliations and politics of American music critics and writers. Now that my friends, family, colleagues, and political confrères will learn that after a near half-century of being on the Left that I am actually a Republican, I fear for my safety!)

With one exception, I am going to leave aside the issue of quality of performances and number of full-time orchestras and opera companies in the US compared to Continental Europe. There has been extensive discussion about the latter in other fairly recent threads and I have made my views clear that I consider on-going historical and social factors the reason for most of the difference.

The exception concerns the average quality of opera performances. Many Continental European companies generally operate on a rather obscure repertory system that results in some performances being inserted throughout a season, purely to satisfy their subscription system. Some years ago, I flew to Hannover to hear a relatively young American sing Fidelio. The performance was uneven, even scrappy, although the soprano sang well. At supper afterwards, she apologised for the performance. The main ‘run’ of performances had taken place a few months earlier. This one had been thrown together with one rehearsal in a rehearsal hall, one sitzprobe and no stage rehearsal at all. Further, several company members had been singing their roles for the first time.

Keeping Hannover as the example, looking at the 2014/15 season, there is no gap as long as several months between performances. But for their opening new production of Tosca, there is one gap of 14 days between performances and another of 19 days. For a revival of 5 performances of Don Giovanni, the gaps are – 22 days, 20 days, 14 days and 8 days! I’d love to know what additional rehearsals are permitted for the performances after the premiere, for without them the quality will be bound to suffer.

I have seen performances at the Vienna Staatsoper which were artistically distinctly shabby. Others, nearer the premiere, have been first rate. Next season, if you want to see Tosca, there are 6 performances in batches of twos – Sept 4 and 8; Feb 3 and 6; Mar 24 and 27. Each pair has a different conductor! Now will any reader insist that the quality of all six performances will be even roughly the same? Frankly, I sincerely doubt it.

In the USA, most companies apart from the Met operate on the stagione system with one opera and mostly one cast being rehearsed and presented before the next. In general, this provides a greater degree of artistic uniformity.

I have seen performances at the Vienna Staatsoper which were artistically distinctly shabby. Others, nearer the premiere, first rate. I do not know if such seemingly arbitrary scheduling remains part of the European repertory system where

William, I have worked in the Arts in the US, Australia, France and Germany and been able to compare the funding structures and the consequences thereof personally – and I essentially agree with your position. I do think, though, that you’re mistaken if you believe the private funding model in the US is supported by the neo-cons only. Yes, many Democrats and progressives in the US would like to see “more” public funding, but the “more” is relative. If I were you I wouldn’t jump to the conclusion that anyone contributing to this forum who writes in in support of the American funding system is neo-con per se. And the sad truth about Germany is that, while everything is significantly better funded, the politicians and government officials entrusted with the money know and care less and less about classical music. It’s becoming a major problem, witness SWR, RSO, Bayreuth, the Hochschulen in Baden-Württemberg, Berlin, you name it ….

I really do not believe it makes any difference if someone posts under a real name or an assumed name. Yes, as I have stated many times, I have worked for decades in the music business in more than one continent. The vast majority of readers will have absolutely no idea who I am even if I use my real name. Yet if I were to use my real name, I could be restrained from giving my comments in certain situations since there could well be some who might feel surprised – or even slighted.

I hasten to add that at no time in my posts have I ever used this forum to ‘attack’ or ‘knock’ any of the colleagues with whom I work or have worked. In one, though, I have mildly knocked a company I once worked for. As for my credibility, I have to leave it to readers to judge for themselves by considering my postings as a whole.

As one of the anti-Gelb camp, it may seem odd that I now make a post somewhat sympathetic to his predicament: specifically the financial situation he and his Board find themselves in.

Back in 1966, two professors at Princeton published a book titled “Performing Arts: The Economic Dilemma”. Whilst the thrust of their argument focused on the symphony orchestra in the USA, I believe it applies to all performing arts organisations which have to commit the bulk of their income to personnel costs. So let’s focus their debate on the Met – and specifically costs.

The core of the book centres on what became termed as Baumol’s “cost disease”. Manufacturing companies continuously take advantage of technological advance to increase productivity and reduce costs (and today by moving manufacturing offshore with even cheaper labour costs). As a result it takes less and less labour to produce a product. In 1966, it was estimated that the amount of labour required to produce an automobile was declining by more than 3% per year. Since then, the introduction of robots has resulted in much more significant declines. But it still takes the same number of orchestral players to play a Wagner opera as in 1966. Thus, if orchestral wages rise at the same level as in the manufacturing sector, the cost per performance has to rise faster than the cost of manufactured goods. Extend that throughout the economy as a whole and the “cost disease” facing performing companies becomes obvious. Ticket prices and donations have to continue rising at a relatively fast rate – or new income sourced.

It’s an unfortunate fact of life that opera companies can make little use of technological advances to reduce their wage bills. Staff numbers must by and large be constant. Front of House staffing is roughly the same whether you programme Mozart or Wagner. Similarly the orchestra, chorus, crew and management must also be of a size capable of performing both Mozart and Wagner.

Updating theatre technology certainly helps, but only up to a point. The massive cost of renovating the old backstage area of the Royal Opera House in the late 1990s, for example, has resulted in very substantial savings in labour costs and greatly increased programming flexibility. That one-off cost therefore resulted in major long-term benefits. But further non-capital technological enhancement will be difficult! Also, innovation and renovation are not going to reduce the size of those Mozart or Wagner forces!

With the Met, the “cost disease” is even more pronounced. Its orchestra employs some of the best and most highly-qualified musicians. To constantly maintain and even improve quality, they need to keep the best players making it difficult for them to be replaced by lower-paid newcomers. Thus, say the authors, “costs are condemned to rise every year, cumulatively, at a rate faster than the average of the economy’s prices.”

Finally, whilst accepting that there will always be ways to improve productivity in some areas (a reduction in profligacy through far greater attention to reducing overtime at the planning stages etc. would certainly help), they stress that such measures are inevitably “limited” .And then, crucially, to the key question, “In a free market economy, is organizational death the natural ultimate theoretical result of ‘cost disease’, or not?” the response was, “Current trends . . . are not encouraging.” Let’s recall, that was written almost half a century ago.

A thought has therefore come to me. Commercial activities now play some role in the financing of many opera companies. Some years ago, the non-profit British Broadcasting Corporation was permitted to exploit its activities commercially. In its annual report for 2013/14, it states a profit of £174 ($285) million from such activities. I know nothing about the legal issues and how the BBC was able to set up specific commercial ventures to generate all this profit. But might there be a time when the Met and other Houses are enabled partially to drop the not-for-profit status, but only to enable them to “go commercial” in a specifically related field whose profits could then be channeled exclusively to the Houses? I’m sure it has been thought of before and there were probably valid reasons against it. But might it be worth revisiting as a way of providing opera companies with some additional revenues necessary to overcome their “cost disease”?